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Did Apple Get A Sweetheart Grand Central Deal?

Posted by
on December 1st, 2011 at 3:56 am

This is the question being asked by some real estate experts & at least one elected official. The company which is set to open its new store in Grand Central Terminal next Friday has arranged a very sweet deal of only $60 per square foot. James Covert & Garett Sloane of the New York Post have more:

But while real estate insiders estimate the shop will rake in $100 million a year in sales, Apple won’t be sharing a nickel with Grand Central’s operator, the Metropolitan Transportation Authority.
The tech giant is the only retailer in the fast-growing retail transit hub to have such a sweet lease.

Critics likewise note that Apple’s $60-a-square-foot lease is well below what many other tenants are paying — including a future Shake Shack burger joint that will be shelling out more than $200 a square foot, according to the leases, copies of which have been obtained by The Post.

That’s a sign that Apple drove a hard bargain with the MTA — despite the fact that the public agency’s budget squeezes are pushing up fares for subway straphangers and suburban commuters across the region.
“We set out to maximize the rent we receive for this space, and we’re thrilled that we were able to more than quadruple what we had been receiving previously,” said MTA spokesman Aaron Donovan, noting that no other companies responded to its public request for proposal.

“I am surprised they didn’t get some kind of percentage,” said Robin Abrams, executive vice president at real estate firm Lansco. “You’d think if they were going to do, say, $50 million in sales, the MTA would at least get some percentage of anything over that.”

In a summary prepared in July in the wake of the Apple lease signing, the MTA justified its no-percentage rent deal by insisting that the gadget store will “generate significant new traffic” for Grand Central Terminal’s other 100 or so retail tenants.

All of those shops and restaurants, with the exception of a Chase ATM branch, pay the MTA a percentage of their sales that exceed a given threshold. For every 1 percent increase in their sales, the MTA projects it will reap $500,000.

While Apple is said to have grabbed the basement space for its “Cube” in front of the GM Building for less than $5 million a year, sources estimate the 10,000-square-foot location is generating annual volume of more than $400 million — and at least $15 million in percentage proceeds for the landlord.

Click here to read the complete story.

State Senator Tony Avella is calling for an investigation after telling WCBS:

There needs to be an investigation of who negotiated this deal. The taxpayers of this state are being ripped off that Apple is getting this sweetheart deal.

Click here for the complete CBS report.

When I first read the amount per square foot Apple would be paying, I laughed out loud & asked to myself, who in the blue hell was dumb enough to negotiate such a deal. I am glad to see I am not the only one wondering this as this screams sweetheart deal from beginning to end.

Now on one hand, the MTA is at somewhat of a disadvantage since there are not many fair comparisons to base fair market value of in terms of the property. However on the flip side, they have to know how much of an asset they have in their corner & not get bamboozled into a bad deal.

While Apple has a new policy of not entering new “percentage rent” deals, the MTA should have forced their hand considering they have such a deal in place for their GM Building location which nets the landlord approximately $15 million per year. While they are paying 4x more than the previous tenant & covering all renovation costs, they are still getting off too easy. The money that the agency saved in renovation is nothing compared to what they could have made per year on a long term basis.

I also take issue with the agency having had no one else bid for the property. How could they possibly not have found other potential suitors for such a prime piece of real estate? In my opinion, not enough was done to attract more bids.

In the end, they will get some extra cash as the extra foot traffic will lead to increased revenue at other retailers in the terminal. However even that is only if non-Apple retailer revenues increase by at least 1% which would net them $500,000 for each occurrence. So in reality, the money they might make from Apple should have been more robust & guaranteed if the deal was properly negotiated.

This deal just infuriates me as I spend a lot of time with commercial real estate & know a smelly sweetheart deal when I come across one. Why does the MTA dishing out sweetheart deals which leave their overall finances screwed seem to be the norm? Somethings just never change….

xoxo Transit Blogger

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Metro-North Port Jervis Line Service Resumes

Posted by
on November 29th, 2011 at 4:05 am

Yesterday was a welcome day for the thousands who depend on the Metro-North’s Port Jervis line. Just a few months after major damage from Hurricane Irene knocked out service on portions of the line, full service has been restored. Elaina Athans of YNN has more:

“It’s a great way to start into the holiday season,” said Metro-North President Howard Permut.

An early holiday gift for Port Jervis Line commuters complete with a small party. Refreshments were hand out and people snapped photos the day service resumed.

“It’s long awaited, but they did a great job,” said commuter Maryjane Ballinger.

“It’s just a lot more convenient,” said commuter Diane Cornacchio

Commuters have been bouncing buses and trains for three months during the repair.

“It’s an extra 45 minutes each way. So this is definitely, definitely great,” said commuter Gail Schweda.

It all comes after Tropical Storm Irene hit the Northeast in August and ripped up 14 miles of railway.

“The bridges were washed out. There were trees all over the place. It was an incredibly powerful storm and it just really destroyed the track,” said Permut.

Click here for the complete report.

Although full service has resumed, riders should note that travel time is a bit extra due to other repairs still needing to be done. Here are those details courtesy of the MTA:

Compared to the pre-storm schedule, train running times will be slightly longer to accommodate continuing work.

Travel time for eastbound trains (to Hoboken/New York-Penn Station) is three minutes longer.

Travel time for westbound trains (to Port Jervis) is up to 7 minutes longer.

Other travel time adjustments are made to individual trains to account for train movement in single track territory.

The additional running time is required due to slower speeds in effect over approximately 3-1/2 miles of track between Suffern and Harriman and because only one of the two tracks between Suffern and Sloatsburg has been returned to service. All trains have to use one track in that area.

We plan to return to a pre-storm schedule on January 15, 2012.

I would like to extend thanks to the hard working MTA employees who helped get service restored not only early but under budget. These are two things that are not seen enough around these parts. Hopefully they will be able to stick to their newly shortened time frame for complete repairs.

xoxo Transit Blogger

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1

A Fascinating 3 Part Series On MTA Bus Planning

Posted by
on November 29th, 2011 at 3:44 am

I was browsing for transit related news when I happened to stumble on a fascinating 3 part look into MTA bus route planning which was written by former Director of MTA/NYC Transit Bus Planning (1981) Allan Rosen.

The first part takes a look at the back story of the 1978 bus route changes in Southwest Brooklyn:

The date November 12, 1978 probably means nothing to you unless it was the day you were born or got married. For me it was a very special day. It was when the MTA implemented the southwest Brooklyn bus route changes I had been working on for four years at the Department of City Planning (DCP).

It was the day that the B21 was replaced by an extension of the B34 and the B1 was rerouted to Brighton Beach Avenue from the Sheepshead Bay Station it previously served. It was the day the B49 was rerouted to the Sheepshead Bay Station to replace the loss of the B1. It was the day the B4 was extended from Bay Ridge (not my idea) to replace the B21 on Emmons Avenue and the day the B36 was moved from Neptune Avenue to Avenue Z to provide a through route along Avenue Z also replacing the B21.

If you are having a difficult time following this, that is because it was the largest and most complex routing changes ever made in Brooklyn or the entire city on a single day until last year’s service cutbacks. Except in 1978, routing improvements were the focus, not service reductions.

Click here to read Part 1 in its entirety.

Part 2 takes a look at how their current bus planning ways are leading to a disaster:

Unlike DCP’s goal, to cultivate ridership by restructuring bus routes to improve connectivity between neighborhoods, the MTA’s mission is to reduce costs by cutting service even if those service cuts result in more inefficient services. They mix improvements with service cutbacks, necessitating the use of three buses to complete a trip where only two buses were required previously, or severing bus connections entirely, forcing former bus riders to rely on car services or make a longer more inconvenient subway trip. When that is the way you plan, there is no wonder why bus ridership keeps going down, but the MTA finds that a mystery.

The MTA is attempting to create a few “super routes” with its local bus system [some of them Select Bus Service (SBS) routes] spaced every mile with good headways compared to the current standard of half-mile spacing, eliminating all other routes except for routes necessary to feed the subway. Those routes, because they serve only one purpose — to get people to the subway — are only well-utilized during rush hours and inefficient at other times. Increased spacing between local bus routes and increasing distances between bus stops, which is what they are also doing, will increase walking distances to bus routes more than the quarter-mile walking standard used in the industry, making them less attractive. In some cases, increasing bus stop spacing does make sense, but sometimes it does not.

The MTA is taking these steps to force more passengers away from local buses and onto the subway because it is cheaper for them to operate the trains since they carry more people and use less direct labor. If those subway trips take longer, are more inconvenient, or are more indirect for the passenger, that is not the MTA’s concern.

Click here to read Part 2 in its entirety.

The 3rd & final installment takes a look at what steps the MTA must take in order to prevent destroying local bus service:

The MTA should be attempting to attract new bus passengers, not try to lose them to the subway or to car services. You cannot attract new passengers by constantly reducing service and increasing service gaps resulting in making travel more difficult. You must plan by considering latent demand, i.e. passengers who would use the system if the routes were improved, something the MTA has never done.

The MTA, however, would disagree with my entire hypothesis. They would claim that the entire purpose of Select Bus Service (SBS) is to make local buses more attractive to passengers. They would say that they have no intention of destroying the bus system and they want it to flourish but are limited by economic realities. Where are the additional Select Bus passengers coming from, which the MTA is bragging about [PDF]? Are they being siphoned from parallel bus and subway lines or are they really new passengers? Are any of them choosing to leave their cars at home in order to ride the Select Bus? I haven’t seen any of those questions answered in any of the data the MTA has provided.

You can make the argument that, in the current financial climate, the MTA cannot afford to provide new or improved service. However, even when there were budget surpluses about 10 years ago, the MTA still showed no interest in improving bus service, insisting that any service improvement must be accompanied by a service cut so that the net result is no total increase in operating costs or bus service.

The MTA refuses to project any revenue increases from service enhancements in making their proposals. By only considering operating costs, not new revenue that might be created toward offsetting those additional operating costs, new or additional service that might attract more revenue than it would cost to provide is never considered. Their assumption is that no bus service could ever make money, no matter how attractive.

Click here to read Part 3 in its entirety.

This happens to be one of the better transit reads I have come across in sometime. It was not only refreshing to learn the real story behind those changes in 1978, but get such an extensive look at a situation that has long been out of control. I find it hard to really disagree with any of the points that he made.

xoxo Transit Blogger

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Service Diversions 11-28-11

Posted by
on November 28th, 2011 at 5:25 am

I have just updated the Service Diversions by removing all of the weekend work that wrapped up 25 minutes ago. All of this week’s work & beyond in some cases is now front & center.

If I see or hear anything of importance, I will update it on Twitter so follow @TransitBlogger or click the button in the sidebar to do so.

The next update will be on sometime late Wednesday or early Thursday after the MTA sends out the official press release with scheduled work.

Have a safe & wonderful week!

xoxo Transit Blogger

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Happy Thanksgiving

Posted by
on November 24th, 2011 at 9:12 am

I would like to take this time to wish everyone a Happy Thanksgiving!

xoxo Transit Blogger

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Uncategorized